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AIMD-99-182R 1 (1999-06-30)

handle is hein.gao/gaobacncs0001 and id is 1 raw text is: United States General Accounting Office Washington, D.C. 20548 Accounting and Information Management Division B-282671 June 30, 1999 The Honorable Charles 0. Rossotti Commissioner of Internal Revenue Subject: Management Letter: Suggested Improvements in IRS' Accounting Procedures and Internal Controls Dear Mr. Rossotti: In March 1999, we issued our report on the results of our audit of the Internal Revenue Service's (IRS) financial statements and IRS management's assertions regarding the effectiveness of its internal controls for the fiscal year ended September 30, 1998.1 We also reported our conclusions on IRS' compliance with significant provisions of selected laws and regulations and on whether IRS' systems substantially comply with requirements of the Federal Financial Management Improvement Act of 1996. The purpose of this -letter is to report additional matters identified during our fiscal year 1998 audit regarding accounting procedures and internal controls that could be improved and to advise you of previously reported management letter2 issues that continue to exist. These matters are not considered material in relation to the financial statements; however, they warrant management's consideration. In our fiscal year 1998 audit, we identified internal control matters concerning policies and procedures over (1) processing abatements, (2) Federal Managers' Financial Integrity Act (FMFIA) reporting, (3) reconciliation of custodial disbursement accounts, and (4) payroll processing and reporting. We also found that certain issues reported in our management letter for fiscal year 1997 continue to exist. These previously reported issues pertain to policies and procedures over (1) management's discussion and analysis, (2) completeness and integrity of master file data, and (3) commingling of receipt and refund transactions in general ledger accounts. We have offered suggestions for resolving these problems or mitigating their effect on IRS' operations at the end of our discussion of each of the internal control matters described in this letter. In its response to this letter, IRS agreed with several of the issues we discussed and our suggestions but disagreed with our observations regarding internal controls over FMFIA reporting, key performance indicators, and master file data. At the end of our discussion of each of the issues in this letter, we have summarized IRS' related comments and provided our 'See Financial Audit: IRS' Fiscal Year 1998 inancial Statements (GAO/AIMD-99-75, March 1, 1999). 'See Management Letter. IRS' Accounting Procedures and Internal controls (GAO/AIMD-98-211R, September 2,1998). GAO/AIMD-99-182R IRS Management Letter

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